Lessons from life experience will last long! If you are an investor, you might have suffered some kind of investment lose or committed some mistakes and finally it might have turned as a life lesson for you. Even great investors done mistakes but, they have never committed the same again. Learning from experiences are great! I have a huge investment lose experience that teach me five important lessons that I thought will share with you for your better knowledge. Read the story below and take necessary precautions to avoid any mistakes that really easy and possible to avoid.
On 1994, I have got a call from my broker saying some IT stocks are booming and recommended to invest my entire money in it to triple within 1 or 2 years. Not bad. No need to go behind 72 formula or wait for several years to get the money doubled. Totally convinced and happy. I had 25k with my trading account and used this capital to purchase 20 shares of the ‘fast boomer’ in a price near 1.5k per share. I was fully confident on broker so thought why would waste time for thinking again? So invested to experience my first and only investing mistake !!!!
Even at that time I had a long term investing habit as advised by Warren Buffett to young investors. I have even not bothered to check the prices of these shares again before 1997 December or what is going on the market. When I checked the prices of above bought stocks at the end of 1997, I was the ‘happiest’ person by seeing the price per share is only 8 !!! I became a clear loser with more than 1.5 k per share. What a clean sweep!. I said a big thanks to god. Not for the lose but, the five core points I have learned on investing! Here are those five points:
1. Never believe any broker blindly and not give them any chance to convince you any way. I have later wrote an article on the criteria to select a right adviser. If I had the knowledge years back, I would not have been a loser of more than 20k from my first careless investment. Read this article multiple time to get better awareness on the must required qualities of a perfect financial adviser.
2. Never invest on hot stocks or fast booming sector. They are clear killers. If you know Warren Buffett, then read his commonly referred saying. He clearly told to the investors on the requirement of avoiding hot stocks or any stocks from a fast booming sector. Remember, rocket went fast to the sky and it will come down to the earth ever more faster.
3. Never invest when the market is peak or top of the bull phase.
4. Never put your total capital to single stock unless if you are not 100% confident on the company. Investing bulk amount always preferable when you know the company meets all the value investing criteria. Even Buffett advice to buy huge when buying. But, he clearly says, one should understand where he is investing and what is the purpose. A three part series to Find Stocks the Warren Buffett way would be a fantastic starting point for investors, especially those who are beginner investor, to identify the best companies to invest properly.
5. Monitor your investments at least once in an year and know what is going on in the market.
There are lots of investing do and don’t everywhere but, the above five I kept as my own which have helped me to prevent any possible lose till today. Even I had suffered a lost at that time, I have earned more than 1000% of that lose by intelligently selecting and investing on business. If you are an investor, I intended this article to the requirements of creating and following a set of own investment policies to avoid mistakes and investment loses.
I love to see your comments on this article. Let me encourage by your comments and suggestions.